Why were the shares not eligible for corporate action benefits even though they were purchased before the ex-date?
Investors need to hold the shares in their demat accounts on or before the ex-date or record date to be eligible for corporate action benefits. To learn more, see What does record date and ex-date mean?
Shares that have not been credited to the demat account by the record date or ex-date will not qualify for corporate action benefits. However, shares bought on or prior to the day before the ex-date/record date will always be credited, except in the following circumstances:
In case of a settlement holiday on the ex-date/record date, the shares will be credited to the demat account on the next working settlement day. For instance, if the shares are bought on Monday, but Tuesday (the record date) is a settlement holiday, the shares will only be delivered by Wednesday, which means they won't be eligible for any corporate action benefits. Therefore, shares must be purchased at least one trading day before Monday to ensure that they are available in the demat account on the ex-date/record date.
- Short delivery: When the seller fails to deliver the shares, it is classified as short. In such situations, the exchange generally carries out an auction and delivers the shares to the demat account by T+2 days. Therefore, if shares are purchased on Monday but credited to the demat account on Thursday or later due to short delivery, they will not be eligible for corporate action benefits since they were not present in the demat account on the ex-date/record date.
Did you know? In case shares are purchased on the ex-date/record date, the stock price would have already decreased to account for the corporate action. This indicates that in nearly all instances, there would be no notional for failing to participate in the corporate action.